Manufacturing Resource Planning

A Manufacturing Resource Planning (MRP) system answers three fundamental questions:

  1. What items are required?
  2. How many are required?
  3. When are they required? 

How effectively these issues are addressed impacts:

  • Cash flow with faster inventory turns, better inventory control, and speedier deliveries
  • Labor costs with better scheduling and improving process efficiencies
  • Customer satisfaction with better fill rates and the ability to respond to customer demands faster
  • Pricing with timely cost and profitability information

The Scope of MRP

The primary use of MRP systems include Bill of Materials (BOM) processing, inventory control, and scheduling. It is used to help organizations maintain low inventory levels and to plan manufacturing, purchasing, and delivering activities.

For manufacturers to meet current and future demand at the lowest possible cost, they must control the types and quantities of materials they purchase and plan how much of which products should be produced.

The wrong decisions will lead to losses. For example:

  • When insufficient inventories or incorrect items are purchased, it is difficult to supply contracted products in time.
  • When excessive inventories are acquired, money is wasted and cash is tied up or lost.
  • When production is incorrectly scheduled, customer deadlines can be missed.

But when MRP is applied, these issues are mitigated as the MRP system considers:

  • Finished goods
  • Appropriate quantities
  • Scheduling to meet demand
  • Shelf life of stored materials
  • Inventory in stock and materials on order
  • Bills of materials for each product
  • Planning data such as routing, labor standards, quality standards, push/pull commands, lot sizing, waste, etc.